1947.

WESTERN AUSTRALIA.

REPORTOF

AND MV)SiTNOT D'" r;c

ROYAL COMMISSION

ON

Wheat Marketingand Stabilisation

WESTERN AUSTRALIA-MAY, 1947

(Without Appendices, Graphs and Evidence)

Presented to both Houses of Parliament by His EXl)ellency's Cosnnunui.

FIRST SESSION OF THE NINETEENTH PARLIAMENT.

No.8.Al'PROXIKATE COST 0' PAPER

Printing (4,000 Copies), £75.l'r..!tTH:

By Au t hor-itye wa. H. WYJ.TT, Govermueut Prluter ,

6965/47 1941

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ROYAL CO;\!MISSION,

WESTERN AUSTIIALIA, 1Br His Excellency Sir James Mitchell,TO 'WIT, j K.C.:i:,Ll+., Lleuteunnt-Ooveruor in om!

JAn-rES MITCHELL, over the State of '\'estern AustraliaLieutenant-Governor. find its Dependencies ill the Common-

[L.S.] wealth of Australia.

To John Smith Teasdale, of 30 Jutland Parade, Dal­keith; Stephen Bede Donovan, of 8 Mount's BayRoad, Crawley; John Sadler, of Goomalling, andRichard Philip Roberts, of the Department ofAgriculture, Perth:

Greeting:

KNOW ye that I, the said Lieutenant-Governor, act­ing with the advice and consent of the ExecutiveCouncil, do hereby appoint yon John S. Teasdale,Stephen Bedo Donovan, John Sadler and RichardPhilip Roberts to he a Royal Commission £01' thefollowing purposes, that is to say t-r-

1. With the object of ascertaining whether itwould be in the best interests of the State and itswheat growers to adopt any, and, if any, what,scheme for the stabilisation and marketing ofwheat i-e-

(a) To enumerate and examine the factors in­volved including the effect of the mostrecent Federal wheat legisaticn includingthe imposition of retrospective Federaltaxation on the proceeds of the 1945-1946crop.

(b) To ascertain what schemes or COUrses ofaction are open to the State hath beforeand after the termination of Common­wealth control of wheat marketing, includ­ing the possibility of the creation of aWestern Australian pool independent oras part of a national stabilisation scheme.

(0) To compare such schemes and courses withschemes and courses relating to the samesubject matter contemplated by 01' opento the Commonwealth, stating the ad\'ant­ages and disadvantages of each.

(d) To examine whether a marketing scheme,either State or Commonwealth controlled,should operate with the sale object ofmarketing wheat to the best advantageOr whether, and to what extent, themachinery of marketing should be linkedwith and form an integral part of a generalscheme aiming to stabilise the industryfor a period of years.

(c) To examine measures taken in Americancountries in relation to the stabilisation oftheir wheat-growing industries, andwhether it would be practicable and desir­able to adopt similar measures in Aus­tralia.

(f) To ascertain whether a Western Australianpool may be legally and satisfactorilyorganised on a compulsory basis, and, ifso, to advise whether it would be necessaryor advisable for the State to acquire therights, title and interest in the wheat, ormerely to act in a fiduciary capacity andmarket the wheat on behalf of the pro­ducer.

(g) To ascertain whether it would be desirableto include in a State marketing schemeany form of forward price guarantee, and,if so, the extent thereof and from whatsources the funds for implementing theguarantee should be obtained.

2. To make recommendations in regard to anyone01' more of such schemes or courses and the mach­inery for implementing the same.

3. To inquire into any other aspect of wheatmarketing which the Commission may deem dcsir­uble.

And I hereby appoint you, the said John SmithTeasdale to be Chairman of the said Royal Couunis­sian.

And I declare that you shall hy virtue of this COIU­mission he a Royal Commission within the RoyalCommissioner's Powers Act, 1902, as reprinted in theAppendix to the Sessional Volume of the Statutesfor the year 1928 and that you shall han' the power:'>of a Royal Commission and of tho Chairman thereofunder that Act.

It is desired that the whole of your inquiries shouldbe made within the State or from material which canhe made available within the State from source" ont­side.

And I hereby request you, as soon as reasonablymay be, and not later than the Lst dar of May, 1947,to report to me in writing the result of this yourCommission.

Given under my hand and the Public Seal ofthe said State, at Perth, this Iith day ofFebruary, 1947.

By His Excellency's Command,

F, J, S, WISE,Premier.

GOD SAVE THE KING I

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ROYAL COMMISSION

ON WHEAT MARKETING AND STABILISATION.

To His Excellency The Honourable Sir JamesMitchell, K.C.1LG., Lieutenunt.Govemor in andover the State of Western Australia and itsDependencies in the Commonwealth of Australia:

In accordance with the terms of the Commissiondated 5th February, 1947, empowering the Commis­sioners :-

1. With the object of ascertaining whether itwould he in the best interests of the State and itswheat-growers to adopt any, and if any, 'wheat schemefor the stabilisation and marketing of wheatc--.

(a) To enumerate and examine the factorsinvolved, including the effect of the mostrecent Federal wheat legislation, includ­ing the imposition of retrospective Fed­eral taxation on the proceeds of the1945-1946 crop.

(b) To ascertain 'what schemes or courses ofaction are open to the State, both beforeand after the termination of Common­wealth control of wheat marketing, includ­ing the possibility of the creation of aWestern Australian pool independent oras part of a national stabilisation scheme.

(c) To compare such schemes and courses withschemes and courses relating to the samesubject matter contemplated by 01' opento the Commonwealth, stating the advan­tages and disadvantages of each.

(d) 1'0 examine 'whether a marketing scheme,either State or Commonwealth controlled,should operate with the sole object ofmarketing 'wheat to the best advantage,or whether, and to what extent, themachinery of marketing should be linkedwith and form an integral part of ageneral scheme aiming to stabilise theindustry for a period of years.

(e) To examine measures taken in Americancountries in relation to the stabilisationof their wheat-growing industries andwhether it would be practicable and desir­able to adopt similar measures in Aus­tralia.

(f) To ascertain whether a Western Australianpool may be legally and satisfactorilyorganised on a compulsory basis, and, ifso, to advise whether it would be neces­sary 01' advisable for the State to acquirethe right, title and interest in the wheat,or merely to act in a fiduciary capacityand market the wheat on behalf of theproducer.

(g) 110 ascertain whether it would he desirableto include in a State marketing schemeany form of. forward price guarantee and,if 'so, the extent thereof and from whatsources the funds for implementing theguarantee should he obtained.

2. '1'0 make recommendations in regard to anyone or more such schemes 01' courses and the machin­ery for implementing the same.

3. 'l'o inquire into any other aspect of wheatmarketing which the Commissioners may deem advis­able.

We have the honour to submit the followingreport:-

SITTINGS OF THE COMMISSION.

The Commission held six public sittings at Parlia-ment House, Perth. .

Invitations to present evidence were sent to anumber of organisations and individuals connectedwith the wheat industry. In addition, notificationof the Commission's willingness to take evidence wasgiven in the daily Press.

The following witnesses appeared before theCommission ;-

Mr. E. F. Fethers-Superintendent of the Aus­tralian l,VLeat Board in Western Australia.

Mr. H. E. Braine-c-Mauager of Co-operativeBulk Handling Ltd.

:J\Ir. T. H. Bath-Chairman of Directors of Co­operative Bulk Handling Ltd.

Dr. G. L. Sutton-Chairman of the Dairy Pro­ducts Marketing Board.

Mr. R. W. Bosisto-c-Chairman of Commissionersof the Rural and Industries Bank.

Mr. J. 'I'homacu-e-Formerly General Manager ofthe Australian Wheat Board.

Mr. J. "T. Diver-Chairman of the Growers'Council of the "rheat Pool of Western Aus­tralia,

Mr. G. K. Baron Hay-Under Secretary forAgriculture.

Mr. W. E. Broadhank-e-Perenjori,

GENERAL REPORT.

1. The scope of the inquiry entrusted to YourCommissioners was of such a wide nature that toreport fully on all matters' relative to wheat market­ing and stabilisation of the industry would haveoccupied too great a period of time and would haveresulted in undue delay in completion of the report.We wish, therefore, to make it clear at the outsetthat the Commissioners approached the task set

before them in the light of current events, viz.) thatthe wheat plan propounded by the Federal Govern­ment in association with the State Governments hadbeen rejected by ballot of South Australian wheat­growers and is therefore not likely to be implementedin its present form.

2. That being the case, it becomes urgently neces­sary for the State Government to give close con­sideration to practical steps which can be takeneither hy itself alone, or in association with otherGovernments, to meet the emergency which maybecome acute at the end of period covered by theDefence (Transitional Provisions) Act, 1947. Thisreport is therefore one that is called for at veryshort notice in order that the State Government mayhave information readily at hand to assist represen­tatives of the State when they arc called upon todiscuss future wheat plans with the Federal authori­ties, with representatives of other States, or alter­natively when the State Government on its ownaccount makes decisions upon matters pertaining tomarketing and stabilisation of wheat. The reportdocs not pretend to be of the nature of a text bookfor marketing plans of a permanent character.

3. The difficulties confronting the Commissionersin making definite recommendations for either ashort 01' a long term plan are greatly increased bylack of clear pronouncement by the Federal Govern­ment whether, in the light of present circumstances,that Government intends to vacate the field of mar­keting, and stabilisation entirely, or whether, andto what extent it expects the States to accept theresponsibility after the termination of the Defence(Transitional Provisions) Act, 19,17.

4. Lacking such pronouncement, the Commis­sioners are compelled to assume--for the purposesof this repot't-e-that the Defence (Tl'ansitional Pro­visions) Act, 1947, under which the whole wheat cropis acquired by the Commonwealth, will terminate on31st December, 194:7, and that some new organisa­tion must he created to carryon from that date, orat the latest, from 30th June, 1948. Nevertheless,the Commissioners are conscious of the fact that aslong as the Commonwealth Government for national,economic, political or other reasons, continues topursue a policy of keeping control OYer the majoraffairs of the wheat industry in its own hands(always providing the Commonwealth Governmentacts constitutionally), there is little scope for selfdetermination hy the State Government. Perforce,it must adopt a policy of eo-operation with suchFederal plans as may be current. That being theease, any plan the State may formulate at this june­ture must be considered as subject to modificationaccording to the course of events in the Federalarena.

5. It would appear, however, that immediately theDefence (Transitional Provisions) Act, 1947, ter­minates, then the ordinary peace-time constitutionalroutine must reassert itself. 'When that time arrives,the type of organisation of industry, which duringthe war has been of a quasi-totalitarian characterwhereby the individual citizen has been compelled toaccept.' a degree of restricted liberty as regards tradeand commerce, will be terminated, and we 'will haveto live and 'York under a democratic constitutionallaw which deliberately sets out to preserve fully theownership rights of the individual citizen in hisproperty, to protect freedom of interstate trade, and

4

which, moreover, forbids the Commonwealth by anylaw or regulation of trade or commerce, to give pre­ference to one State or part thereof over anotherState 01' part thereof.

6. As far as the Commonwealth is concerned, con­stitutional obligations and reservations, particularlyclauses 51 (31),92 and 99 have a very vital bearingon the type of organisation which can be establishedfor marketing primary products, and that being thecase, all wheat plans must be such they can be legallyand satisfactorily operated within the horizon setby the paramount law.

7. It can therefore be said that the difficultiesconfronting either the Commonwealth or State increating marketing organisations are principally ofa legal and constitutional character.

8. On the other hand, arrangements for a satis­factory stabilisation plan are not hedged by seriouslegal 01' constitutional difficulties. The obstacles tobe overcome are chiefly polifieal, social and economic.

9. This being the case, and despite the fact.that marketing and stabilisation are more or lesslinked together in the terms of reference, the Com­missioners have found it more convenient to considereach subject separately as far as can be done.

WHEAT 1IARKETING.

Reference 1 (a).1. I'To enumerate and examine the factors in­

volvcd, including the effect of the most recent Fed­eral wheat legislation, including the imposition ofretrospective taxation on the proceeds of the 1945­1946 crop."

2. At the moment of writing this report, thequestion, "What will be the ultimate effect of theretrospective Federal taxation on the proceeds ofthe 1945-1946 (No. D Pool) wheat"? cannot he defi­nitely answered. Wha t the effect will be dependsupon the decisions by the High Court and by 'theCommonwealth Government.

3. Some time ago a writ was issued in the HighCourt by the Nclungaloo Pty. Cov., against the Coni­monwealth Government claiming an amount of 8s.7el. pel' bushel on a quantity of bulk and baggedwheat delivered by the Claimant to the agents ofthe Wheat Board for inclusion into No.9 Pool. Thebasis of the claim was that the plaintiff is entitledto compensation on "just terms" for wheat deliv­ered to the Wheat Board, calculated according toits value as at the date of acquisition, and that theprovisions of Regulation 19 of the Wheat Acquisi­tion Regulations, S.R. 1929, Number 96, and Amend­ments, do not provide "just terms" in accordancewith the constitution. The amount of 88. 7d. pel'bushel is the amount which the Plaintiff contendsto have been the value of his wheat at the relevantdate. Judgment on the claim has not yet been given.

4. On a date subsequent to the acquisition of thewheat in question and in fact after the writ had been'issued the Commonwealth Government introducedinto Parliament retrospective taxation upon 1945-46wheat under the title of the Wheat Export ChargesAct, 1946, levying a tax on all wheat exported calou­luted at the rate of fifty per centum of the amountby which the average price per bushel £'0.1'. at port

of export for j.a.q, bagged wheat of ali the wheatof that season exported exceeds 58. 2d. This tax ispayable by the exporter.

5. Ministerial declarations indicate that maximumtax levied under this Act. will be 2s. 2d. per bushelbut although there is power to prescribe such maxi­mum by regulations, no such regulations have yetbeen promulgated.

6. 'I'he Commonwealth Government apparentlythought that this Act might not achieve the desiredeffect. if the 'claim (mentioned in paragraph 3)happens to be successful and subsequently amendedit so as to provide that the charge should not becollected on wheat handled by the ,Vheat Boardprior to the 1st October, 1947 j and introduced anotherAct known as the Wheat Tax Act, 1946, whichimposes a tax in respect of all wheat of the 1945~46

and 1946-4"7 seasons -..vhich has been acquired by oris acquired by the Commonwealth. The tax underthis Act is payable by the grower.

7. A complicated method is prescribed by the,'{heat Tax Act for the calculation of the tax butin substance the meaning of that Act appears to bethat g'rcwers will pay a. tax which will yield to theCommonwealth a total sum not greater than 50 percent. of the excess over 5s. 2d. per bushel receivedfor all 'wheat exported, up to Ils. 6d. f.o.b,

8. The aggregate amount of the tax will be pay­able by all growers in proportion to their respectivedeliveries of wheat to the Wheat Board whether suchwheat is exported or sold in Australia.

·9. It appears to your Commissioners that, if agrower claims and receives compensation under Regu­lation 19 of the Wheat Acquisition Regulations, thenet result to him will be that he will get an amountbased on the total proceeds of the sale of wheat bythe Wheat Board, less deductions including the taxpayable by him under the Wheat Tax Act; but ifhe obtains compensation Oll the basis of "just terms"by making a claim against or sueing the Common­wealth in the same way as the plaintiff (mentioned inparagraph 3) he will have to pay tax under the'Wheat Tax Act out of the compensation he receives.The amount of tax will be based on the excess over5s. 2d. of the aoeroqe price realised for all wheatexported-even though the compensation received bythe grower may be less than such average price.

10. The whole amount collected under the WheatExport Charges Act and The 'Wheat Tax Act willhe paid into the Wheat Prices Stabilisation Fundconstituted by Section 31 of the 'Wheat IndustryStabilisation Act, No. 24 of 1946, which section wasproclaimed on the 13th March, 1947. If the otherrelevant sections of this Act are proclaimed (thishas not yet been done) the stabilisation fund willbe used to guarantee the minimum price of 5s. 2d.per bushel f.o.r. ports to all growers, but if thosesections are not proclaimed growers will be at themercy of the Commonwealth pending such proclama­tion or the enactment of substituted legislation.

11. In view of Ministerial declarations that themaximum tax collected under the Wheat Tax Act isto be 2s. 2d. pel' bushel on export wheat the WheatBoard has given a certificate to the Minister, pur­suant to the provisions of the Wheat Tax Act, tothe effect that a tax of Is. l'jzd. is the estimated

5

amount per bushel, averaged 0"e1' the whole of thewheat acquired by the Board, necessary to yield atax of 2·s. 2d. per bushel on all wheat exported. Thisfigure may be fractionally increased when the accountsof number 9 pool are finalised.

12. The Commonwealth 'I'reasurer in due coursewill make a demand on the Wheat Board or alterna­Lively on the Minister for Commerce for paymentfrom Pool funds of the due amount.

13. The effect of the taxation measure has beento reduce the payment of the amount involved asdividends to growers.

14. The total amount involved by the tax underthe Wheat 'I'ax Act on the 1945-46 wheat [number9 Pool) is £6,916,780. The question whether or notthe retrospective tax imposed on this wheat can havethe effect of reducing the amount of compensationdue to growers will not necessarily be dealt with inthe action (mentioned in Paragraph 3).

15. At the time of writing this report it appearsto your Commissioners that although growers maysucceed in claims for compensation on the basis of"just terms" if the action (mentioned in paragraph3) results in favour of the plaintiff, and althoughthey may become entitled to receive payment fromthe Commonwealth of such compensation, they willstill he obliged to pay the tax imposed by the WheatTax ..Act. Furthermore, it also appears probablethat the Wheat Board will be required to deduct theamount of the tax from any sum found to be dueto the growers on the basis of compensation all "justterms" because Section 6 of the Wheat Tax Actempowers the Commonwealth or the Wheat BORrdto deduct any amount of the tax payable by anygrower from any moneys payable by the Common­wealth or the Wheat Board to that grower On anyaccount whatsoever.

16. The ostensible purpose of the tax is to pro­vide a fund to be used for the stabilisation of pricesin future years as set out in Clause 31 (of No. 24 of1946) and reads as follows:-

31. (1) There shall he a Wheat Prices Stabili­sation Fund into which shall be paid anamount equivalent to the charges from time totime collected under the Wheat Export ChargeAct, 1946, and Wheat Tax Act, 1946.

'(2) The Wheat Prices Stabilisation Fundshall be a Trust Account within tho meaning ofSection sixty-two A of the Audit Act, 1901-1934.

(3) 'Out of the moneys standing to the creditof the Fund there shall be paid to the Boardsuch amounts as are necessary for the purposeof enabling the Board to make payments inaccordance with the provisions of Sectioneighteen of this Act.

(4) In the event of the amount standing tothe credit of the Fund being at any time insuffi­cient to meet the payments required under thisAct to be made from the Fund there shall bepaid to the Fund out of the ConsolidatedRevenue Fund the amount necessary to meetthe deficiency.

(5) The Consolidated Revenue Fund is to thenecessary extent hereby appropriated for thepurposes of the payments to be made to theFund under Subsections (1) and (4) of thissection.

(6) Moneys standing to the credit of the Fundmay be invested in securities of the Common­'wealth or on deposit in the Commonwealth Bankand the income of such investments shall formpart of the Fund.

17. As Section 31 is the only section of this Actwhich has yet been proclaimed the legislative pro­vision for disposal of the fund contained in Sec­tion 18 has not yet come into force.

IS. In the light of the fact that the proposedWheat Plan has been rejected in South Australia theCommonwealth will no doubt give consideration tothe matter at an early date.

19. In the meantime the proceeds of the taxappear to be governed by Clauses 81, 82 and 83, ofthe Constitution which .reads as fcllows i-c-

81. All revenues 01' moneys raised or receivedby the Executive Government of the Common­wealth shall form one Consolidated RevenueFund to be appropriated for the purposes ofthe Commonwealth in the manner and subject tothe charges and liabilities imposed by this Con­stitution.

82. The costs, charges and expenses incidentto the collection, management and receipt of theConsolidated Revenue Fund shall form the firstcharge thereon; and the revenue of the Com­monwealth shall be in the first instance be appliedto the payment of the expenditure of the Com­monwealth.

83. No money shall be drawn from theTreasury of the Commonwealth except underappropriation made by law.

Iicforcnce 1 (ll).20. "To ascertain what schemes 01' courses of

action are open to the State both before and afterthe termination of the Commonwealth control ofwheat marketing, including the possibility of thecreation of a. Western Australian Pool independento~' as part of a national stabilisation scheme."

Reference 1 (d).21. "To examine whether a marketing. scheme,

either State or Commonwealth controlled;" shouldoperate with the sale object of marketing wheat tothe best advantage, or whether, and to what extent,the machinery of marketing should be linked withand form an integral part of a general scheme aimingto stabilise the industry for a period of years."

Reference 1 (f).

22. "To ascertain whether a Western 'Australianpool may he legally and satisfactorily organised ona compulsory basis and, if so, to advise whether itwould be necessary or advisable for the State toacquire the right, title and interest in the 'wheat, ormerely to act in a fldueiary capacity and marketwheat on behalf of the producer."

23. Under the heading of "General Report," theCommissioners have drawn attention to the difficultyof setting out a course of action for the State tofollow pending a clear pronouncement by the Fed­eral Government in regard to their intentions.

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24. Such evidence as the Commissioners havebeen able to secure has not resulted in any definiteindication of Federal policy. Your Commissionerscan, however, point to the undeniable fact that sincethe decision given by the Privy Council that Clause92 of the Constitution binds both the Commonwealthand the States, provision of legal sanction for a 100pel' cent. compulsory Commonwealth pool is extremelydifficult if not impossible to arrange.

25. Support is given to this view by the factthat responsible Federal spokesmen have 'repeatedlystated it would he necessary for all States to passcomplementary legislation to support a Federal Actbefore a 100 per cent. compulsory pool could be setup.

26. The wheat plan recently propounded restedupon a basis of complementary State and Federallegislation. But the plan also stood upon two otherprops, the importance of which has not been gener­ally appreciated, particularly by the farmers.

(a) In the States Acts a clause was insertedexempting from acquisition "all wheat thesubject of trade, commerce or intercoursebetween the States 01' required 01' intendedby the owners thereof for the purposesof trade, commerce or intercourse betweenthe States."

(b) Provision in the Federal Act for the Min­ister to direct the Board in regard toselling prices plus a public declaration bythe Federal Government of intention tosell wheat for internal consumption in allStates at a pr-ice below current exportparity.

27. '1'he exemption clause in the State Act safe­guarded the Act against attack on grounds of con­flict with Clause 92 of the Constitution.

28. The relatively low price available for internalsales of interstate wheat in competition with thepool made it a certainty that no growers would wishto avail themselves of the exemption provisions ofthe State Acts, since transfers across State boun­daries could only result in the seller securing a lowerpi-ice than could be obtained in the home State fromthe pool which had the advantage of some exportsales in the make-up of average price. However,only two States, Queensland and Tasmania, havepassed the necessary Acts. 'I'he South AustralianGovernment stated in definite terms the plan wouldnot be implemented in that State unless growersgave an affirmative vote at the ballot. 'I'he questionsubmitted at the ballot was negatived. In Victoria,the Premier, ]\11'. Cain, has announced his Govern­ment does not intend to proceed with the measure,'whilst New South Wales has not introduced the Billto Parliament.

29. Other factors of importance which appear tooperate against the continuance of Federal controlof marketing are:-

(1) The Defence (Transitional Provisions) Act,1947, under which all wheat is now beingacquired by the Commonwealth is due toterminate at the end of December, 1947.

(2) The fact that the declared policy of arbi­trarily fixing internal wheat prices on alevel below parity, a cardinal feature ofthe plan, is one which automatically andin varying degrees 'inevitably penalisesStates of relatively high production, andby the same token gins preference, toStates of relatively high consumption,thereby conflicting with the underlyingprinciples of Clause 99 of the Constitu­tion, which reads;-

The Commonwealth shall not by anylaw, by any regulation of trade, com­merce 01' revenue, give preference toone State or any part thereof overanother State or any part thereof.

Your Commissioners are advised that aslong as the fixation of selling prices ofwheat for internal consumption withinthe States is uniform, such action does notconstitute a breach of constitutional law.The continuation of such a practice does,however, operate so unjustly between theStates that as a consequence cessation ofFederal control may have to be aban­doned for political reasons.

(3) 'I'he possibility of heavy claims upon theTreasury arising ant of the fact thatacquisition of property by the Common­wealth may only be made on just termsand for a purpose in respect of whichParliament has power to make laws.

(4) The fierce puhlic controversy surroundingthe principles, terms and conditions of therecent wheat plan seriously jeopardisesthe chances of any other scheme, undersimilar jurisdiction, being brought tofruition during the relatively short life ofthe Defence (Transitional Provisions)Act.

(5) 'I'he steady trend towards abandonment ofwage pegging and price controls.

(6) The apparent swing away from the idealsand mechanics of economic isolation infavour of the opening out and expansionof world trade in foodstuffs and rawmaterials, as 'witness the decision to signthe Bretton Woods Agreement.

30. On the other hand, evidences pointing towardscontinuance of Federal control are:-

(1) The declared policy of the present FederalGovernment to maintain control of thewheat industry.

(2) The continuation of world shortages, anddisorganisation in the production of food­stuffs.

(3) Internal and external transportation diffi­culties.

(4) Tho possihility of an international treatybeing made in respect of wheat. Someeminent jurists have claimed that the exis­tence of such a treaty would give the Com­monwealth power Over production andmarketing of a primary product to anextent greater than would otherwise bepermitted by the Constitution.

7

(5) The fact that the Commonwealth has enteredinto an agreement with New Zealand tosupply 41j2 million bushels pCI' year forfoul' years.

31. In the light of the conflicting circumstancesenumerated above, most of which are beyond thepowers of the State to resolve, being of a Federalcharacter, your Commissioners can only set out aplan for marketing the wheat crop of W.A. basedupon an assumption that the Federal authority mayfor one reason or another suddenly decide to vacatethe .:field of marketing.

32. Your Commissioners also desire to draw atten­tion to section 2, subsection (c) of the CommonwealthPowers Act, No.4 of 1943, passed by the Parlia­ment of 'V~stern Australia. This section providesthat subject to certain limitations mentioned in theAct, the following matters, inter alia, are referred tothe Parliament of the Commonwealth, that is to sa;r-

Organised marketing of wheat, but so thatno law made under this paragraph shall discri­minate between States or parts of States in rela­tion to the marketing of such commodities.

Section 5 of this Act provides that subject to earlierrepeal and to any amendments thereof, the Act shallcontinue in force for a period ending at the expira­tion of fi\Te years after Australia ceases to be engagedin hostilities in the present war, and no longer.

33. Experience over more than a decade hasproved that Federal Parliament rarely comes to gripswith any wheat marketing plan until so late in theyear that the har-vest is nearly ready to be deliveredto country sidings. If the present uncertainties arenot resolved until a similar period this year, the Statewill be faced with extreme difficulty in passing thenecessary State Act and making general arrange­ments to cope with the emergency. As a matter offact, unless some enabling legislation has alreadybeen placed on the Statute Book and other vitalarrangements been advanced to such a stage theycan be put into motion at short notice, chaos illmarketing the crop 'Will be a certainty.

34. Your Commissioners interpret the term mar­keting to cover the operation of receiving the wheatfrom the producer, making contact with andnegotiating with buyers within Australia and over­seas, and making all the arrangements for land andsea transport between producers and buyers on themost efficient and economical basis.

35. The marketing organisation has also toarrange the financial transactions which arise betweenproducers and buyers variously separated by distanceand time.

36. Broadly speaking, there are three generalmethods which can be adopted:-

(a) Controlled marketing whereby all the pro­ducers a're compelled by la-w Ito placetheir wheat into the hands of an organisa­tion authorised by Parliament to receive,store, transport and sell to buyers, toarrange finance and pay advances all

account, and finally the balance of therealisaHops to growers.

(b) Free marketing (usually termed "open mar­keting"), whereby outright sales by grow­ers are made to grain merchants andmillers at or neal' the time of delivery.Under this system ownership passes tobuyers, who must on their own accountmake all subsequent arrangements tolocate buyers and transport thereto.

(c) Co-operative marketing by growers on apurely voluntary basis. Under this sys­tem some part of the gro-wers join togethervoluntarily or by mutual contracts, hand­ling their wheat for marketing purposesto an organisation owned and directed bythemselves.

37. During times of war when marshalling offood supplies is imperative for defence reasons, Orbecause of disruption of trade finance or transporta­tion, controlled marketing becomes almost a neces­sity. This was the method adopted in almost allcountries during the 1914--18 and 1939-45 wars. Butduring the period between the two wars a combina­tion of free marketing and voluntary pooling appliedin U.S.A., Canada and Australia. The questionnaturally arises. "Are present circumstances suchthat control over marketing operations can 01' shouldbe relaxed 9" Ships and finance enter largely intothe question.

38. Merchants operating in the open grain mar­ket conduct their operations to a great extent on abasis of simultaneous buying and selling and theyare abl o therefore to finance on the grain in hand01' through the security of shipping- documents. Itwill be clear, therefore, that to enable such trans­actions being carried on with financial safety, ona large scale, the merchants must be able to makefairly definite forecasts when he will be able tomove grain from country points to seaboard, shipit to overseas countries and find buyers there whowill take delivery as the ships arrive at ports. Lack­ing reasonable certainty in these directions, openmarketing operations become highly speculative, andtherefore difficult to finance. In a word, the propel'functioning of the open market on a full scaledepends upon the existence of a reasonably free mar­ket in both producing and consuming countries, andreadily available transportation facilities betweensellers and buyers.

39. Quite apart from considerations whether intimes of peace controlled marketing is preferable toopen marketing, your Commissioners are of theopinion the essentials of open marketing are notavailable at the present juncture to such an extentthat wheat merchants could cope with the task ofmarketing the crop expeditiously and in the volumerequired by the producers. Some form of poolingremains the only alternative.

40. Pools, whether compulsory or voluntary,arrange finance on a basis of overdrafts from bank­ers or loans from other financial institutions. Seeur­it,)' is usually taken oyer the wheat pending sales,but in some cases Governments give the bankers aguarantee covering advances made. It is thereforenot so essential when operating a 'pool to forecastexactly the date when wheat will move to buyers asit is with private merchandising. By reason of thef~ct that the firs~ advaucea made by -pools to f?rower§

8

are considerably below the current market price ofsuch wheat as is going into consumption, securityagainst loans can be maintained, progress dividendsbeing paid as sales are made during the year.

41. In times of war, when trade between produc­ing and consuming countries as well as transporta­tion is disrupted or uncertain, the pooling methodis the most suitable.

42. It would he possible to re-establish a voluu­tarv pool in \\r estern Australia as was done immedi­ately after the war of 1914-18. That pool served theindustry as a marketing organisation faithfully andwell oyer the whole period between the wars, andundoubtedly could do so again if called upon, themaehiuerv and skeleton statf of trained officers havingbeen ret~ined through the war perid. This appliesin like degree to the London end of the business.The pool operates under an Act of Parliament ofWestern Australia.

43. There is, however, a strong deeire amongstfarmers that all growers should be brought into acommon organisation. This can only be achievedby a measure of compulsion which can be exercisedby the Commonwealth Government only by virtue ofthe defence powers. When these expire, the authorityfor control of marketing operations by the powersof acquisition rests primarily upon State powers.

44. Whilst your Commissioners have considerablesympathy with the ideal of a Commonwealth Poolentirely controlled by growers we feel that the onlyway to work up to SlICh a position is to start fromthe basis of a State unit; then as the machinery isdeveloped it will be comparatively easy to form acommon organisation throughout Australia to co-or­dinate and manage the selling of wheat overseas.

45, In deference to that desire and in preparationto meet the situation which develops both bcf'ora andafter Commonwealth control ends, your Commis­sioner's consider a Bill should be brought before theState Parliament at a date not later than August ofthis year to sanction the establishment of a StateCompulsory Pool covering all wheat marketed inWestern Australia with the following exceptions t-e-

(a) 'Wheat, retained on the farm of originrequired for feed and seed.

(b) Wlleat which has already been sold by thePool Board.

(c) Wheat sold or delivered to any person withthe permission of the Pool Board.

(d) Wheat the subject of trade, commerce andintercourse between the States or required01' intended by the owner thereof for thepurpose of trade, commerce 01' intercoursebetween the States.

46. Proclamation of such an Act should bedelayed until a date to be fixed, or until the StateGovernment has obtained information publicly orotherwise from the Federal Government on the follow­ing points r-c-

(1) Whether it is the intention of the FederalGovernment to extend for a further periodthat portion of the Defence (Transit.ionalProvisions) Act, 1947, which applies towheat.

(2) whether the Federal Government intends toacquire that portion of the 1947-48 cropwhich will in the ordinary course hedelivered to country sidings prior to theterminating date of the Defence (Transi­tional Provisions} Act, i.e., 31/12/47.

47. Although the Constitution of Australia pre­serves freedom of trade and intercourse among theStates it would appear that an Act acquiring all themarketable crop within the State would be valid pro­vided it specifically exempted wheat the subject of,or intended by the owner for the purposes of inter­state trade. The presence of such an exemption inthe Western Australian Act would have little materialeffect in diminishing the receival into the pool sincethe high transport charges which would 1Je incurredin sending wheat to another State would act as aneffective deterrent to anyone desirous of sending itover the Western Australian harder, unless the priceobtainable in the East was much higher than inWestern Australia. Such a position is not likely toarise in the near future. In any case the with­holding of say 1 01' 2 pel' cent. of the crop from thePool for the purposes of interstate trade would havelittle influence on-bushel costs of handling nor wouldit materially diminish the Pool's efficiency.

48. In the organisation of a Pool the sentiment ofloyalty plays a vital part. It therefore follows thatverv definite benefits derive from a clear and uumis­tak~able understanding that the Pool managementshall at all times act in a fiduciary capacity on behalfof the Pool participants.

49. Trusteeship of that character builds up thesense of responsibility of the Executive Officers andstaff to the producers on the one hand and of thepool participants on the other. Strong encourage­ment is given to the ideal of "all for each nud eachfor all."

50. Development of this principle tends to buildup self reliance and self help in the control of thebusiness itself, a much more desirable attitude ofmind than dependence on the Government.

51. There is, however, considerable difficulty inapplying such a principle when reliance has to 1JOplaced on compulsory acquisition by Act of Parlia­ment.

52. After giving full consideration to all thecircumstances enumerated above and to the evidencetendered by witnesses, your Commissioners considerthe State should in the first instance acquire therights, title and interest in the wheat. Haying doneso the State should then strive to attach to the planconditions of a true partnership in responsibilitiesand benefits as naturally arises in any joint effort.

53. In order to implement the foregoing yourCommissioners make the following suggestions:-

(a) Constitution of the Board.

Four 'representatives of the Growers.One representative of the Government,

The representative of the Government to have theright of temporary veto OYer any decision of theBoard, pending reference to the Minister-s-if in hisopinion any proposed action of the Board will jeopar­dise the security for any advances made to growersor if the Board decides to charge the consumers in

9

Australia a price higher than world parity, or higherthan such other price as may be determined by Par­liament from time to time.

'rhe Chairman of the Board to he appointed bythe Board itself.

(b) Basic Principle of the Pool.

It should he a basic principle of the Pool that theBOHrd of 'I'rustccs should act on strictly commerciallines freed from political influences. In other words,the Pool should at all times act as a sales departmentfor the wheat industry. The necessity for its estab­lishment and the principles which should govern itaoperations, do not materially differ from those apply­ing to the Dried Fruits and Dairying Industries andto big industrial 'units like the Broken Hill Pro­prietary and Imperial Chemical Industries. Shouldthe Commonwealth desire to make deductions fromthe realisations for the purposes of stabilisation 01'

equalisation of prices 01' concessions to consumersthese deductions should be made through the taxingpower of the Commonwealth Parliament not byadministrative act of the Board of Trustees.

If the pooling system? of marketing wheat is tooperate successfully ancl with reasonable chance ofperm((nence, the most posittve steps must be takento prevent the crop being useii by any Governmentas a pa,tv'Jl. in the business of internal 01' externalpolitics.

(c) Finance.

Finance for the payment of the first and subsequentadvances to growers and for handling costs shouldhe arranged by borrowing from the Rural CreditBranch of the Commonwealth Bank .which was estab­lished for such purpose, or alternatively through theState Rural Bank on the security of the wheat sup­ported if need be by guarantee hy the State Govern­ment. The amount of the first advance can only bedetermined by considerations of market values andopportunities existing near the opening date of thereceiving season in question.

(d) Power of the Board to Take Over Assets.

The Board should he empowered to take over suchassets of the Australian Wheat Board as are inWestern Australia on terms mutually arranged.

(e) Export Control Board.

Even though the Commonwealth vacates the fieldof marketing proper it is practically certain someform of export control will be established in orderto align national policy with world affairs. Such con­trol will probably be exercised by the Customs.Department in association with the Department ofExternal Affairs. In all probability- the ocntrol willbe operated by means of permits. The State Poolwould have to comply with control arrangements justas the Australian Wheat Board does at the presenttime. The existence of an Export Control Board pre­sents no fundamental difficulty to a State Pool.

(f) Arrangements with Other States.Subject to the ohligation to keep separate accounts

for each State, the Board of 'I'rustees of the Poolshould be empowered to enter into agreements withsimilar organisations in other States for the purposesof establishing overseas selling agency and co-ordin­ating export selling policies,

(g) London Agency.

The London Selling Committee which has beenoperating for the Australian Wheat Board and whichhas all the contacts at that end of the world, shouldbe appointed.

(h) Review of the Act.

Provision should be made in the Act for a ballotof growers to be taken to\\'31'(18 the end of the 1950­51 selling season on the following two questions:-

(a) whether the marketing organisation estab­lished by the Act should be continued.

(b) Alternatively, whether the compulsoryclauses of the Act should remain or beremoved.

According to present arrangements control ofwheat marketing by a single seIling organisation inCanada is due to end in 1950. If at that timeCanada, U.S.A. and Argentina all revert to freemarketing, Australia will be compelled in her owninterests to review her export marketing machineryin the light of those' circumstances. It is hoped bythat time world affairs in regard to trade, shippingand finance will have become more settled than theyare at present, and moreover, the Pool organisationwill have been tested in regard to efficiency andservice. The growers should decide.

(i) Growers' Council.

Included in the Act should be provision for theappointment of an elected growers' council on similarLues to that set out in the Voluntary Pool Act.

Whilst it will be necessary for the Government inco-operation with producers' to make the originalappointments to the Board, the growers' councilshould act as an electoral college for the appointmentof growers' representatives to the Pool Board afterthe first year. Each grower should have one votein his respective district. Members of the PoolBoard should hold office for foul' years and retire inrotation.

By this process it is calculated to align the rightof each grower to take his place in pool controlwhilst at the same time provide machinery for selec­tion of men of proved ability to the Pool Board.

(j) Other conditions of the Act might generallyfollow the lines of the State Act for the mar­keting of barley.

Reference 1 (c).54. "To compare such schemes and courses with

schemes and courses relating to the same subjectmatter contemplated by or open to the Common­'wealth, stating the advantages of each."

55. In view of the fact that at no time has aCommonwealth and a State wheat marketing schemeoperated simultaneously or under exactly similarcircumstances an;y comparison regarding the advan­tages a Federal organisation has over a State one,01' vice-versa, of necessity must rely upon the cor­rectness of personal judgment supported as may beb;y such facts and figures as are available. Also, itis necessary to have a clear conception what is theprincipal objective of the marketing organisation.

10

56. If control over the crop is being set up fOT

the purpose of marshalling the wheat to supply somenational purpose outside the specific horizon ofgrowers' interests, such as is' the case in war time,then undoubtedly that purpose can best be servedby highly centralised control in a Commonwealthpool. Wheat supplies may, by such a process, bedirected to any point in the military or economicarena thought to be expedient by the high command.It was because of such necessity during the periodof armed conflict that the collective interests of theindustry and of the individual grower had perforceto be subordinated to the needs of Australia and theallied nations. Full and unfettered control of allwheat coming off the farms had to be established.But the' 'war has passed, and that being the case, anew orientation is called for. Efficient service to theindustry becomes the paramount, objective, so thatthe wheat-growers shall reap the full rewards oftheir labours and the industry take its rightful placewith the other industrial elements of the community.The type of organisation most suitable for this pur­pose is one which is as close to the producer and hisparticular requirements as is consistent with economi­cally co-ordinated, efficient and intelligent service.

57. By being located close to the producers, themanagement does not lose its singleness of purpose,namely, to serve the industry.

58. Furthermore, the proximity of the growersto the management preserves the all-essential spiritof responsibility to each other, and provides a con­tinuous incentive to greater and still greater stan­dards of efficiency. No observant person can pos­sibly ignore the fact that centralised, and frequentlydistant, control over industry during the war periodhas brought about a downward trend in efficiencyand in the general standards of willing service. Asfar as Wheat Pool affairs are concerned, the Chair­man of this Commission, who has had full oppor­tunity to judge, is definitely of the opinion that oneof the most outstanding features of the organisa­tion has been the management of local arrangementsby the respective State superintendents and the agen­cies conducting the physical handling of the grainand flour. 'I'hey had a clear conception what theirjob was and the obstacles which had to be overcome.Owing to war-caused disruption to transport, bothinternal and external, changes in working plans andimprovisation have been almost a weekly occurrence.The men on the spot have shown their ability to dealwith almost any emergency. In view of the greatamount of publicity during recent months in regardto the operations of the Australian wheat scheme asa whole, your Commissioners do not wish to makefurther comment, excepting to point out that mostof the controversies arise out of the fact that theFederal Government has decreed that selling pricesfor wheat consumed within Australia for any pur­pose shall remain at 01' neal' a level of ds. Ll.d. bulk,or 5s. 2d., bagged, pel' bushel, f.o.r., ports, whilstexpor-t pi-ices have steadily mounted to the presenthigh level of 16s. pel' bushel, bulk. The steadyincrease in world prices began to show itself duringthe period when No. 5 Pool wheat was going intoconsumption.

59. By the time wheat of the season LJ43-44,No.7 Pool, began to go into consumption, the policyof maintaining fixed prices of wheat for internal

11

Internal Consumption Price.c-Preseut level fis. 2d.bagged, f'.o.r., with adjustment to bulk basis 4s. Ll.d.f.o.t'.

Export Price AYel'age.-Ten shillings per bushelf.o.r. bulk.

60. The table refers to the season 1039­40 to 1946A7 inclusive, for which figures call begiven almost exactly, but in assessing the relativevalue of a State Pool as compared with a Common­wealth Pool in future years, dependance must behad on estimates rather than established facts.

61. Assumptions must be made in regard to­

(1) The volume of the Australian crop.(2) The volume of the Western Australian crop.(3) The amount of wheat consumed as flour,

stoekfeed, breakfast foods and for otherpurposes.

('1) Export prices.

consumption began to have disadvantageous effectsupon the producers as a whole and, moreover, pena­lised the States of relatively high production to amuch greater extent than those of high consumption.By reason of the relatively small demand for localflour and stock feed, Western Australia has been andstill is being adversely affected to an increasingextent as the figure.'! taken from the Pools accountswill demonstrate (these figures are shown in Schedule"A" on page 19).

6.5. Another very important fact is that theCanada-United Kingdom contract, fixed upon "mostfavoured nation" terms will be likely to put a floorlevel into wheat prices till it terminates in 1950.Mter making all the adjustments which condition theminimum prices for the third and fourth year, thatcontract will probably average at least 155 centsFort 'William or "its equivalent 170 cents f.o.b. ),1011­

treat On this basis there is reasonable assumptionthat the average wheat value at Australian ports forthe same period will" work out at not less than lOs.per bushel and may quite easily be more.

67. Your Commissioners arc not unaware of thenumerous forecasts fa-om official sources that a slumpwould occur "within two years," hut three years havealready passed since such warnings became common-

64. The reasons causing your Commissioners toadopt the assumption of lOs. per bushel for exportwheat call for some explanation. At the outset, yourCommissioners 'wish to make the assertion that neitherthey, nor anyone else, call speak dogmatically aboutfuture wheat prices. There are uncertainties of todaywhich become factors in the determination of wheatprices tomorrow, but which arc unpredictable at themoment. Wheat prophets are no more dependablethan weather prophets. Weather conditions in bothexporting and importing countries, which in turnaffect both supply and demand, eannof be forecasted.Who could have foreseen the terrible winter sufferedin the :N....orthern Hemisphere even a month ahead ofthe cafastrophe ? We can hardly guess what theweather will be next year in Kansas, Saskatchewan,Santa Fe, or New South Wales. 'Ye don't even knowwhether it. will rain heavily at Kellerberrin in Sep­tember. There may be bountiful seasons, droughts,frosts or rnst in any of the principal wheat areas ofthe world. \Vhat we do know, however, is that therearc no considerable areas of new wheat lands to openup as was the case after the 1914-18 war. We alsoknow that the stark spectre of hunger stalks throughEurope and Asia as never before. We know thatthe reserve stocks of wheat which were held a fewyears ago have gone into consumption and that theworld is entirely dependent. upon annual productionto meet the excessive demand. We also know that theEuropean machinery of production was substantiallydestroyed during the war, and has not yet been rebuilt.It is doubtful whether any g-reat relief in prices willensue till reserve stocks have built up and that seemsunlikely to happen before 1950.

66. Another factor of major importance govern­ing wheat prices is the high price level of all com­modities in the United States of America. No-oneexpects wheat prices to be on a low level even thoughwe have good harvests while other consumable goodsare phenomenally high. Moreover, the Roosevelt plan,which still operates in America, aligns to a consider­able extent the prices of all agricultural productswith other commodity price levels. It is well toremember that when the big break in wheat pricesoccurred thirteen years after the 1918 Armistice,there was no such machinery of stabilisation in exist­ence in U.S.A. It was ereated later to assist in pre­venting a recurrence of such a happening. Canadianand American prices form the basis of all our exportprices in Australia.

Millionbushels.

333%:y"

23

60

Local flourBreakfast foodsMiscellaneousStcekfecd ..

62. 'I'he next table (Schedule "B," page 19), whichattempts to measure effects from present date to theend of 1050, is based upon the following estimates t-c­

Millionbushels.

Marketable crop-Al.lstrulia 145Marketable crop-Westerll Australia .. 29Internal conaumption-r-Australia 60Infernal consumption-Western Aus-

tralia 4%

Internal Price, 45. Ll.d. per bushel f.o.r. hulk.

Export price, average, lOs. pel' bushel f.o.r. bulk.The reasons why these figures are accepted by the

Commissioners are given later.

63. Similar estimates for Schedule "B" arc as£ol1ow:-

Marketable Crop.c-Australie, approximate average=: 145 million.

Marketable Crop.c-Wcstern Australia, 20 pel' cent.of Australian figure = 29 million.

Since 1920-30 to date, the Western Australian crophas averaged almost exactly 20 per cent. of the totalAustralian crop.

Internal ConsumpHon.-

place, and meanwhile prices have risen from Ba. to16s. Such statements are usually more politicallyobjective than factual,

68. Shipping Freights.-The geographical positionof Western Australia, as compared with the EasternStates, brings about cheaper freights to U.K., India,Ceylon and Africa, where most of our export wheatwill find a home. Recent adviees from London esti­mate this benefit at threepence to fourpcnce perbushel on wheat cargoes. This saving should averageabout twopence per bushel over the whole W.A. crop.

69. Summarised, 'the benefits which appear toderive from a pool on a State basis are:-

(a) A State Pool can be established on a firmerlegal and political foundation than a Com­monwealth Pool, thereby achieving a muchgreater chance of permanent and peacefulexistence.

(b) The management will be more in co-operativecontact with producers within the Stateand may in consequence be expected 't-Omeet their requirements with greaterunderstanding. There are trained officersin this State the equal of any in EasternAustralia.

(c) Short of a return to open marketing, a Statepool provides the only practicol way inwhich wheat marketing can be rescuedfrom the unfortunate position it hasreached, i.e., a cog in the machinery ofinternal and external politics. Further­more, the development of pools in eachState will provide an automatic safeguardagainst arbitrary bureaucratic controlover a very widely spread industry.

(d) Assuming average production conditionsthroughout Australia, and as long as itis public policy to sell wheat for internalconsumption at the 5s. 2d. (bagged) levelof prices when export wheat is, say, lOs.,a State pool will give W.A. gTOWCl'S

a greater return than a Common­wealth pool to the average extentof more than £200 each per yearcalculated O\'eT 8,000 growers. Shouldexport prices fall to a point belowthe 5s. 2d. level, then the flour tax beginsto operate again. The proceeds of theflour tax are distributed on a productionbasis throughout Australia. It has beensuggested some future Federal Govern­ment might alter the distribution of thetax to a basis of flour consumption inplace of wheat production. Assumingwheat dropped to 3s. 2d. at ports, such achange in distribution procedure wouldadversely affect W.A. about SYzd. pel'bushel annually. Such a change of pro­cedure in distribution of the flour taxwould raise serious political objection byother States as well as by W.A., and isnot, in om' opinion, a practical proposalas viewed from the political angle. More­over farmers in Eastern States wouldbenefit less than one penny per bushel bysuch an alteration of the method of dis­tribution.

12

(e) Because of a more favourable geographicalposition in relation to principal buyingcountries, charter Tates arc lower fromW.A. than frO:111 Eastern States ports.The State pool would automatically con­serve this natural benefit to our own grow­ers. A State pool can handle wheat atsidings, mills and ports as economicallyas a Commonwealth pool.

(f) A State pool can organise the sale of wheatto millers and stockfecders on such termsand conditions as may be laid down byParliament without meeting the difficultieswhich confront a Commonwealth pool.The State pool would, however, automati­cally limit the concession to Western Aus­tralian consumers, thereby conserving theState's income.

70. A Commonwealth pool can more easily alignits operations with any export control which may heset up, hut there is uo insuperable difficulty prevent­jug a State pool complying with any arrangementswhich may be necessary.

71. Ji State pool can supply the basis, if need be,for the collection of any stabilisation tax levied bythe Commonwealth, just as readily as could a Com­monwealth pool.

72. Ji State pool can by agreement with similarpools in other States participate in the organisationof a London selling agency and ensure that accountsbe kept separately.

73. One advantage which a Commonwealth poolhas over a State pool arises out of the fact thatthe Commonwealth organisation can divert shipsintended to load at ports in one State to ports inanother State, should any unforeseen circumstancessuch as breakdown of internal transport or industrialstoppage cause shortage of supplies at the point itwas at first intended to load the ship or ships inquestion. The range of diversion available to a

'State pool would necessarily be more limited.

Reference 1 (e).

74. "f'o examine measures taken in Americancountries in relation to the stabilisation of theirwheat-growing industries and whether it should bepracticable and desirable to adopt similar measuresin Australia."

75. Your Commissioners have studied the plan forstabilisation of the price of agricultural productswhich was developed as part of the late PresidentRoosevelt's New Deal.

76. The plan aims to maintain prices for certainbasic agricultural products on a parity with othercommodities. It has now been in full operation formore than a decade and it has made a great contri­bution to the welfare of farmers in "the United States.Tho depression of the "thirties" left the farmers ofU.S.A. in a condition of abject poverty. Partly dueto the stabilisation plan and partly due to the veryhigh prices they have obtained in the war years, theagriculturists have been raised to the position of acreditor class. The plan is purely voluntary in its

13

operations, and is implemented by the Federal GOY­

ernment offering loans without recourse to the farmeron terms decided periodically by Parliament. If thefarmer does not wish to accept the loan rate offeredhy the Government, he is at liberty to sell his grainin the open market. Quite obviously, the loan rateputs a floor into the open market.

77. Attached to this report is a brief statementshowing the set-up of the American plan as it appliesto wheat.

78. Whilst your Commissioners are agreed theAmerican plan' constitutes the most ambitious andeffective scheme of stabilisation of. farm prices, weconsider it is more suitable for a country with anextensive home consumption demand than for a eoun­try like Australia, with a relatively high export pro­portion. Moreover, the present period of abnormalprices for both primary and secondary commoditiesdoes not constitute sufficiently stable conditions underwhich to initiate a similar plan in Australia.

79. ,Ve have abo attached to this report parti­culars of the Canadian contract with the UnitedKingdom covering the period till 1950. This agree­ment has had the general effect of stabilisation offarmers' returns during that period. In reality, how­ever, the stabilisation is provided by the British con­sumer.

B ecom-m ell datio »s.1. That the State Government draw the attention

of the Federal Government to the fact that the aggre­gate income of \'iTestern Australia is being seriouslydiminished by the continuance of the policy of sellingwheat for flour, stoekfeed and other purposes withinAustralia at a heavy discount below overseas valuesand request the Federal Government to recoup suchamounts as may be shown to be the net loss to theState which has arisen out of such concessioual salesas Lavc been negotiated since the termination of thewar period covered by the original National SecurityAct ending December, 1946.

2. That in the event of the Federal Governmentcontinuinc to control wheat sales by means of anextensionOaf the period of Defence (T'ransitional Pre­visions) Act, request be made to the effect that theaccounts for each State be kept separate ana pro­ceeds credited to the realisations from the producingState.

3. That the State Government represent to theFederal Minister for Commerce that current sellingprices of wheat for milling into flour for home con­sumption, for stockfeed and all other purposes withinAustralia be raised to Bs. pel' bushel f.o.r. bulk basis,and further, that upon all sales for purposes otherthan flour production a subsidy be granted to liftthe return to the pool to export parity as determinedfrom week to week. Also, that prices of mill offalshe raised 50 per ecnt., and by so doing align themwith comparable stockfeeds which at the presentmoment stand as follows ;-

Bran, at £.5 18s. 10d. truck lots, 2,000 lbs. ­£6 13s. Ld. per ton of 2,240 lbs.

Pollard, at £5 18s. 10d. trnok lots 2~OOO Ibs. ­£6 13s. 1d. per ton of 2,240 Ib3.

Chaff, at £9 truck lots 2,240 lbs. = £9 per tonof 2,240 lbs.

Barley, at 4s. pel' bushel of 59 lbs. = £8 19s. 10d.per ton of 2,240 lb~~

Oats, at 38. 9d. per busbel of 40 lbs. = £10 lOs.pel' ton of 2,240 lbs.

Wheat, at fis. per bushel of 60 lbs. = £9 6s. dd.per ton of 2,240 lbs.

For the purpose of comparisou t-r-

"Wheat, at gs. per bushel of 60 lhs. = £1418s. Bd.pel' ton of 2,240 lhs.

Wheat, at 16s. per bushel of 60 lbs. = £29 17s.4<1. per ton of 2,240 Ibs.

This alteration of flour prices after allowing forproper offal returns should not raise the price ofthe 2-lb. loaf more than one penny.

4. That in order to make timely preparation forthe possibility that the Federal Government ceasesto control wheat marketing by reason of the termina­tion of the Defence (Transitional Provisions) Act,on 31st December, 1947, or for any other reason, aWheat Marketing Bill on the lines indicated in thisreport he brought before the State Parliament notlater than August, 1947.

5. That in the event that the Bill passes throughParliament successfully, proclamation be withhelduntil October, 1947, or such earlier date as may bedecided should the Federal Government announce itsdecision to vacate the field of wheat marketing.

G. That the Act be administered with a view toassisting and encouraging wheat-growers to lookupon wheat marketing as a task for the industryitself working on co-operative self-help lines freedfrom political influences.

7. That the first period of the Act be from thedate of proclamation until the end of the 1950-51.selling season, but subject to extension or amendmentthereafter, according to the will of Parliament. andthe wheat-producers.

8. That the State Government encourage otherGovernments in wheat-growing States to establishcomparable orgnuisatione with a view to the creationof a joint organisation designed to co-ordinate andconduct overseas trade in wheat and wheat products.Providing one or more States agree to co-operate insuch organisation, the plan proposed for the eggindustry might be considered as a guide.

STABILISA'rION.1. Eyer since the calamitous fall in wheat prices

in the early thirties, there has been a demand byfarmers for some form of stabilisation of agriculturalprices and in consequence Governments of manycountries, notably the United States, Canada andAustralia, have given serious consideration to theproblem and more particularly as it applies to wheat.It is beyond question that instability in prices fromyear to year of a commodity like wheat brings un­favourable reactions to a great number of otherindustries. 'I'o a State like Western Australia, solargely dependent upon whentgruv....ing,. the import­ance of stability in prices cannot be over-estimated.

2. Before passing to a review of the variousmeasures introduced into Australia, it is desirable torefer briefly to the steps taken to grapple with theproblem in American countries.

U.S.A.3. Although no country in the world was so highly

developed industrially and financially as the UnitedStates when the depression came, primary producers,whether growers of wheat, maize, cotton 01' livestock,

suffered as acutely as did their confreres in Canadaor Australia. Extreme- hardship, poverty and bank­ruptcy became the lot of many industrious andefficient farmers.

The problem of right relationship of the pricesof agricultural products to other consumable goodsbecame one of first magnitude to the whole nation.It was this issue more than any other which broughtthe Democratic Party into power 'with the late Frank­lin D. Roosevelt at its head. ""Tith the help of hiscolleagues and his economic advisers, he brought for­ward the general plan of economic restoration whichbecame known as the New Deal. Right at the baseof the' "New Deal for the Nation" was the plan tolift prices of basic agricultural products to a com­parative level with the things farmers must needsbuy for the equipment and operation of their farmsand for the normal requirements of their households.Shortly put, the plan adopted provided for the estab­lishment of a Commodity Credit Corporation fin­anced from Federal funds. At the outset, some diffl­eulties of a constitutional character were encountered,because of a conflict of State and Federal powers,but these were finally overcome by limiting the advan­tages of guaranteed prices to those farmers whoundertook to comply with national plans for soilconservation.

Selection of a five-year period was made in whichwheat prices 'were aetuat'ially estimated to be relativeto other eouimodities, and these prices were estab­lished as "parity." Parliament authorised the Com­modity Credit Corporation to make loans withoutrecourse to any farmer who had signed soil conserva­tion agreements and on the security of his wheatdocuments. The Credit Corporation' then proceededto store or sell the wheat in the local or export mar­ket as circumstances warranted. The net result ofthis operation was that all the wheat in elevators 01'

on farms which was outside the control of the C.C.C.remained at comparative price levels. One point inconnection with this plan should be noted, i.e., thatParliament each year determined whether C.C.C.should offer a loan rate a little above 01' a littlebelow statistical par-ity, and by so doing gave encour­agement 01' discouragement through prices to exten­sion 01' contraction of acreages.

Parity rises 01' falls in relationship with the generalcommodity price index.

The plan has been in successful operation for morethan a decade and has, in conjunction with wartimeprices, been the means of lifting the farming classfrom a position of penury to one of reasonable pros­perity. Of the industry as a whole it can be said tohave risen from a debtor to a creditor position.

'I'he American plan can truly be said to be themost ambitious and successful plan of stabilisationimplemented in any country. And, being American,it follows the Iinea of democratic freedom of choice.It is neither eompulsot-y nor totalitarian.

Oanada.4. Canada for her part took a different course.

Her first attempt was to authorise a wheat commis­sioner to buy on the Winnipeg Grain Exchange when­ever prices fell to an agreed minimum level. Theplan was helpful for a time, but eventually met withrather undeserved disaster. The prospective failureof the plan and the consequential financial reaponsi-

14

bility was partly the cause of the fall of the Cana­dian Government. But 'within a matter of weeks,crops suffered a serious rust visitation, with the resultthat wheat stilI in the hands of the Government morethan liquidated the liability.

Despite the partial failure of the first attempt tostabilise Canadian wheat prices, farmers in thatDominion have shown a desire to achieve some mea­sure of stability, and it was this desire, as well asto make a sale, which was responsible for the negotia­tion of the contract between Canada and UnitedKingdom in June, 1946. The sale covered 600 millionbushels spread over four years, ending' in 1950.'I'his contract provides a basis for a first advanceto growers of 1.35 dollars at Lakehead for the wholeperiod, which is approximately equal to 7s. 1d. atsiding in the centre of the Canadian wheatbelt. Stabi­lisation of growers' returns in Canada has in factbeen supplied by consumers in Britain rather thanby the Canadian Government,

In regard to wheat which the Control Board sellsto other buyers, prices follow current world figures,which, of course, are mostly governed by Chicagovalues.

Realisations over and above the initial advancesare placed into a common fund to be liquidated prorata to bushelage delivered at the end of 1950 season.By this process of deferment, the Canadian farmerhas assisted the cause of price level maintenance fortho nation. Full control over 'wheat marketing inCanada has been established by a law which ter­minates in 1950.

International Agreement.5. During the period since the depression,

attempts have been made on an international planeto level out and control prices within limits. Thefirst of these attempts was made by a group of 23nations comprising' both producers and consumers.The London agreement was entered into in 1933, but,owing to the heavy pressure of supplies, particularlyin Argentina, the plan failed. This London agree­ment of 1933 was first based upon a condition ofunwanted surpluses, and to cope with that situationprovision was made to restrict output from export­ing countries when stocks reached certain dimensions.

6. Another attempt has been made by a muchsmaller group comprising Br-itain, Canada, U.S.A.,Argentina and Australia, in 1941-42.

7. Discussions have dragged on spasmodically forsome years, but little real progress has heen made.Representatives of a larger group are again in con­ference, but as the condition of world surpluses hasgiven place to one of' general shortage, it is obviousa new basis must be sought. Argentina first announcedthat she would not enter into the agreement, andnow Britain has followed Slut on grounds of dis­agreement about proposed prices. Whe1hel' the otherrepresentatives will agree to submit a common planto their respective Governments cannot he forecasted,but it is quite on the cards that there will be noimmediate implementation of any plan, at any rateuntil the Canada-United Kingdom contract and theArgentina contracts with Brazil, Spain and Switzer­land terminate in 1951.

8. About two years ago, as a result of conferencesin Washington, suggestions were made to fix a two­year price agreement which would have given Aus-

1941-42 5 28. IOd. 3s.1942-43 6 38. IOd. (quota wheat) 48. (quota wheat).

6 Is. Iud. (non-quota 2s. (non-quotawheat) wheat).

1943-44 7 3s.lId. (quota wheat) 4s. Id. (quotawheat),

7 Is. lld. (non-quota 28. Id. (non-quotawheat) wheat).

1944-45 8 Ss. lld. (quota wheat) de. Id. (quotawheat).

8 ze. IOd. (non-quota 3s. (non-quotawheat) wheat).

1945-46 9 The quota system was suspended. Farmersreceived a flat rate on all wheat deliveries.

48. ld. "'148. 4d.1946-47 10 de. Id. •.. 4s. 4d.

in transport. As a result of increasing world demand,increased domestic consumption and better shippingfacilities, stocks were already declining when the 1944drought occurred. Since then, the situation has beenentirely changed. Acreage restrictions have beenabandoned, the use of wheat for stock feed has beenbrought within bounds by a 'rationing plan, and over­seas prices have risen to extraordinary levels. Thepresent problems are therefore those which arisefrom world scarcity and particularly concern themeans by which sufficient grain can be retained athome and be sold at levels far below what it wouldbring in the export market.

First Advances by Pools.

10. In order to place Australian wheat produc­tion in alignment with the suggested export quotalaid down in the international agreement, each State'sbasic area was calculated by taking the average areasown for grain oyer the five years preceding 1940-41,which was the year when the 'Wheat Industry Stabi­lisation Scheme was enacted. The basic area set for\Yestern Australia was 3,243,458 acres.

17. The National Security Wheat Industry Regu­lations and the Wheat Subsidy Act of 1944 providedfor the appointment of a Federal Stabilisation Boardand for State committees. The Board was givenpowers in relation to the control and regulation ofthe production of wheat, the registration of wheatfarms and the licensing of persons to grow wheat.

18. The basic area of each registered farm wascalculated on the average area cropped from 1937-38to 1940-41, inclusive. This Board is still functioningunder the authorisation of the Defence (TransitionalProvisions) Act, 1947.

19. Owing to the difficulties in transport, both bysea and land, coupled with the heavy 031'1')'-Over ofstored wheat, special restrictions amounting to one­third of the basic area "were applied to "Western Aus­tralia during the seasons 1942-43 to 1944-45, iuclu­shoe. As a measure of compensation for diminishedrevenue, the Commonwealth paid the growers 12s,per acre, calculated over the area specially restricted,i.e:'Io one-third of the basic acre-age.

20. During the 1945-46 season, there was a volun­tary restriction 'of one-sixth of tho basic area, andfarmers who voluntarily adopted this measure ofrestriction were paid compensation to that extent.The total payments made by the Commonwealth inrespect of the special acreage restriction in 'V.A.was £1,965,684.

15

tralia a floor price approximating 3s. 10d. pel' bushel.t.o.b. and a ceiling price about 7s. 3d. f.o.b., but asprices rose to levels above this ceiling, whilst thetalks were going on, the attempt to fix a price rangewas abandoned for the time,

Australian Control Measures.9. Having in mind the production control clauses

of the International Agreement, Australia, in 1940,commenced to take preparatory ste-ps to put herwheat production and stocks position into alignmentwith the general plan. Nominally, the internationalpluu should have come into operation at the end ofthe war. If it had done so, and we had had heavystocks on hand, we would have been obliged by theterms of the agreement to make further drastic cutsin production. However, the whole supply positionchanged, and the immediate need for an internationalagreement on the lines of that provisionally signedin London in 1942 does not appeal' to be veryclamant.

10. In 1930, the year in which world wheat pricesbroke, Australian growers harvested a record cropfrom the largest acreage they had ever sown. Govern­ment assistance for the industry became imperativeand between 1931 and 1936 tho Commonwealth Gov­emment paid some £14,000,000 in relief and bountiesto wheatgrowers. On account of improved pricesin the 1936-37 and 1937-38 seasons, the bounty wasdiscontinued, but. with falling prices there was arenewed demand for a more permanent scheme forstabilising the industry. In response to this demand,a scheme was evolved by the Federal and State Gov­ernments whereby the price of wheat for home con­eumption in the form of flour was maintained at5s. 2d. pel' bushel f.o.b. Williamstown, equivalent toan average of -ls. 7d. bulk at country sidings. Whenthe world parity price was below this figure, an excisetax operated on domestically consumed flour. 'Whenthe export price rose above 5s. 2d., the flour tax leviedon consumers was to be replaced by a wheat taxlevied on producers. The Federal legislation forthis measure was embodied in the Flour Tax Act,1938, and it is still operative. The complementaryWlient 'I'ax Act of 1938 has not, however, been pro­claimed. As the Flour Tax Act is not dependentfor its validity all the defence powers of the Com­monwealth, it will continue after the expiration ofthe Defence {Trnnaitionnl Provisions) Act, 1947.

'11. With the outbreak of war, the CommonwealthGovernment entered the field of wheat marketing,and late in 1939 established a Commonwealth COll1~

pulsory wheat pool under the National Security(Wheat Acquisition) Regulations.

12. Acreage restrictions were imposed in 1940,and there was a guaranteed price of 3s. 10d. perbushel f.o.h. ports for a marketable crop of140,000,.0°0 bushels. Similar conditions prevailed inthe 1941 season. In 1942, a first advance of 4s. perbushel was made at country sidings for the first3,000 bushels delivered b;y each farmer and 2s. perbushel on the remainder of his deliveries. Addi­tional advances were made from each pool as thewheat was sold.

13. This quota system remained in force for theseasons 1943-44 and 1944:45, but in the latter yearthe first advance on non-quota wheat was increasedby Is. per bushel.

14. In the early years of the war, the problemwas one of low prices, surplus stocks and difficulties

Season.I

paOli First Advance (per I F.O.B. PortNo. bushel) Bulk. (bagged).

21. POl' the season 1946-47, all forms of arearestriction ceased. In addition, 223 farms in 'V.A.not previously qualified under the regulations weretemporarily registered and licenses issued to theseIl€"W settlers.

Methods of Price Equalisation.

22. It seems desirable at this stage for the Com­missioners to draw attention to the fact that thereare three distinct forms of stabilisation receivingpublic consideration at the moment.

Firstly: 'l'heru is the matter of limiting the rangeof pril:{'5' to be paid by consuming countries toexporters. In other words, to arrange a world price;

Secondly: There is the matter of equalising thereturns to growers over a period of years by someplan or plans operating within the limited ambit ofeach producing country.

'I'hirdly : There is the prohlem of relating wheatprices to the general commodity price level withinAustralia.

23. It is clear that the first of these objectives canonly be achieved through international agreement.Representatives of the Commonwealth have been inconference with those of other countries in London,but the prospects of success do not appear to be veryrosy. Your Commissioners are not quite sure whetherthe negotiations have 01' have not been entirely brokenoff. However, Argentina, a leading exporter, andBritain, the biggest importer, havo each notified theirunwillingness to sign the agreement, the bone of con­tention being future prices. There does not appearto be any prospect of the problem of price fixationin the international arena being settled by generalconcord before the termination of the U.K., nineCanadian 01' the Argentine-Spanish-Bmailian andSwiss contracts in 1950-51.

24. Undor the circumstances, your Commissionersdo not consider they can usefully make any recom­mendation on this aspect of stabilisation, but we doaffirm our belief that the avoidance of booms andslumps, which characterise wheat markets, would beof great benefit to producers.

25. A greater degree of stability in wheat priceswould assist in stabilising land values, and wouldencourage the adoption of rotations and systems offarm management calculated t.o maintain the fertilityof the soil. It would also facilitate the financing offarming operations.

26. Regarding the second all(l thiNl aspects ofstabilisation, yOII}, Commissioners are definitely ofthe opinion that suitable action lies 'with the FederalGovernment ruther than with the State Government.Nevertheless, your Commissioners desire to make thefollowing observations and recommendations to theState Government in order to assist in hammering outplans for the wheat industry throughout Australia.

27. It has been frequently stated that the greatmajority of farmers ardently desire stabilisation ofprices. \Vhilst that Illay true, there are quite a sub­stantial number of fanners who have given little orno support to any of the proposals which have beenadduced. As a matter of fact, these farmers reallybelieve they are capable of providing their ownreserve funds in good periods to tide themselves oyerlean years and also manage their funds to betteradvantage than anyone else. As a 1'l11e, these farmers

are of mature age who are in the way of making goodand wish to make better. They have learned the valueof prudent investment.

28. Some wish to invest their savings outside theindustry in order to facilitate retirement when agedemands. Others wish to clear off indebtedness orimprove the farm and its amenities. And justrecently there has been a yery striking and spon­taneous demonstration by well oyer a thousand WestAustralian gTowers of their desire to maintain therights of ownership in wheat they have produced,which rights have been partially overthrown by con­stituted authority during the war period. These men.daim they have purchased their fnrms-e-frequentlyfrom the Crown itself-han borne all the cost ofproduction and by themselves 01' with the aid ofhired labour have Sown the seed and garnered thecrop. Theil' claim to full ownership is as sound asthe title deeds relating to any other form of property.'I'heir equity in the produce of the land is unchal­lengeable except maybe on the theory that "the earthis the Lord's and the fullness thereof." And if thatprinciple holds good for wheat producers, it ought tohold good equally with every other owner of goodsor proper-ty whatsoever.

29. If the Government when setting up an equali­sation plan desires to recognise the rights of self­determination of these farmers, then obviously pro­vision should be made in the equalisation plan toallow them to contract out. Declaration of desire tocontract out would of necessity have to be made atthe yery outset of the plan and be irrevocable.

30. Decision on this fundamental principle restswith the Governments of the people, not ...vith a Com­mission of four men. Our task is merely to note thefact.

31. But, outside the group of producers referredto above, there stands another very considerablegroup who desire to participate with their fellowsin an equalisation scheme of some sort, provided onecan be devised on an equitable basis.

32. During the last few years, members of farmers'organisations have spent much time and effort dis­cussing various aspects of stabilisation, equalisationand price guarantees and have carried a great numberof resolutions at their meetings. These resolutionsindicate a very wide range of variation in farmers'thought.

33. At one end of the scale is the sternly practicalidea that equalisation of prices should be arrangedoyer a relatively short period of years in which fore­casts of events can be made with reasonable accuracy.Such a plan visualises a method of equalising thereturns to growers by making deductions in highprices years, thereby accumulating a fund to augmentreturns in the years when prices are low. The greatestamount of outside aid these men expect is that theGovernment will stand behind the fund duringperiods of temporary shortage.

34. At the other end of the scale stand a fairlyconsiderable group of growers who hold to the beliefthat it would be a grand thing if some Government01' other organisation or some plan (heedless of worldconditions} would guarantee the farmer a payableprice for all his output over an indefinite period.Proponents of such resolutions can be classified as

devout wishful-thinkers. Whilst their sincerity isunquestioned, they do not serve the industry as wellas they might. While they stand a'dreaming, wcr­shipping the "moon of their delight," solid, matter-of­fact opportunity to put the industry on a sounderfinancial basis passes by the door.

35. Your Commissioners do not consider that sucha happy solution to producers' price problems lieswithin the horizon of practical economics. Greaterservice to the industry can he achieved by keepingthe practical always in mind. "re have to realisethat when the Government promises a guaranteedprice for wheat, it pledges the public credit by thosame stroke of the pen, and that being the case, theguarantee fund (unless entirely provided by growerson an equalisation basis} must he limited in totalamount either by the guaranteed price being low orthe hushelnge restricted. As a rule, both these limita­tions come into the picture. And just because Gov­ernments come and go, Parliamentary, sanction fora policy dependent upon annual budgetary appro­priations cannot be guaranteed for a lengthy period.

36. The general body of taxpayers, comprisingproducers of all kinds of commodities, are liable toask whether they arc not equally entitled to be guar­anteed the cost of production plus a profit for allthe output of their factories, whether for internal11S£' or for export.

37. Your Commissioners consider that a claim for11 guaranteed price for wheat can only be sustainedto the extent it applies to the amount normally con­sumed within Australia in the form of flour andother processed foods for human consumption. Thereis little justification for the extension of the gum-an­tee to that portion of the crop which is exported,either as wheat or wheat products. In this sphere,the grower must endeavour to produce at a pricethe overseas buyer is prepared to pay. After p1'O­viding the homo price for wheat consumed withinAustralia and apart from possible iutcrnatioual actionlimiting the range of export prices, there appear tobe two wave that relief from this hard fact can beprodded. 'First, the growers can establish an equali­Ration scheme to operate over a period of years withsuch augmentation as the Government may chooseto make or, secondly, the Government of the day mayput a floor under wheat prices as cireumstaneeswarrant from time to time. Fanners should not losesight of the fact that when Governments give anyform of guarnntcc to cover other than for local con­sumption restrictions of one kind or another go handin hand with the guarantee.

38. A self-supporting equalisation scheme isimpossible of realisation if commenced in a periodof low prices. Its chief assurance of success lies inthe accumulation of substantial funds in prosperousyears for use in augmenting receipts. in low-priceyears. For that reason, the present is an appropriatetime to lay the foundation in anticipation of lessfavourable conditions in the future.

3D. In planning an equalisation scheme, the firstpoint to be determined is the total sum required toprovide n real safeguard against a fall in prices.Assuming internal prices can be arranged on a satis­factory basis, then the reserve fund need only bemeasured in relation to the export portion of the crop.Accepting an average marketable crop of 145 millionbushels then, with flour and internal sales at, say,

17

55 millions, there remains 90 millions to be cared for.'I'he next two points to he reckoned are the possibleavet-age range of the fall and the period of theslump. As an illustration, let us take the averageshortage over the period at Is. Gd. per bushel, whichallows the dip down to, say, Sa. below datum point.Allow for a period of five years and the calculationis 90,000,000 x 5 x Is. Od. = £32,500,000. Allowingfor the interest-earning capacity of the fund beforedisbursement, then a fund of the order of £30,000,000would provide a very solid reserve, sufficient at anyrate to cushion the effect pending the general reduc­tion of costs which might he expected to follow arecession in cereal prices. This figure is not beyondthe capacity of the industry. As a matter of fact, thetotal of the deductions made by the recent wheat taxlegislation will he about £11 millions. Providing wehave a normal season in 1D47-48, and the tax remainsas at present, it will approximate £20,000,000.

40. The question of the farmer preserving hisindividual equity in such a fund has been much dis­cussed and presents some difficulty because, if, assuggested, the scheme is to be of a permanent nature,then it follows that the fund must belong to thefarmers collectively at least while it does not exceedthe amount stated as a necessary TeSer\'CJ i.e., £30to £33 millions.

41. When the fund exceeds this reserve, pro ratarepayments could be made to the individuals whocontributed the first year or alternatively pro ratato the payments to the fund in a five-year period,such process to be continued year by year as thefund warranted. ~ny repayments made to a growerstill in the industry for the purposes of price equalisa­tion could be deemed to diminish his equity in thegeneral reserve to a like extent.

42. A similar procedure, called a revolving fund,is adopted in the marketing of certain primary pro­ducts in U.S.A. and is in fact the basis of the deben­ture operations of Co-operative Bulk Handling Co.,Ltd., in W.A. It would be necessary to have anequity register of growers with provision for insert­ing amounts contributed On the one hand and amountswithdrawn on the' other. This again would followC.B.H. procedure.

43. As in the case of marketing, the Commis­sioners consider that the machinery of equalisationshould be as far removed from the realm of politiesas possible. Nevertheless, since the only authorityhaving power", of excise taxation is the Common­wealth, it would be necessary for that Governmentto levy the tax and the Commissioners recommendthe State Government to make representations to theCommonwealth with this object in view.

44. The moneys derived from the tax should beplaced in a trust fund and operated on by a Stabili­sation Board representing the Commonwealth, theState and the growers. 'I'his board would also be thenatural authority to handle production control ifsuch again becomes necessary.

45. One of the basic principles governing the trustfund should be that it be used for price equalisationonly. Withdrawals from the fund for drought 01'

flood relief, insect 01' rust visitations or other similarhappenings should be specifically debarred; other­wise the fund might he whittled away for a purposefor which it was not intended. 'l'his aspect deservesthe closest attention by the State Government.

18

Soil Conservation and Guarantee(l Prices.

46. Having in mind the 'stimulus given in Americato a policy of soil conservation by limiting priceguarantees to those farmers who will co-operatein a common plan to prevent erosion, your C0111­missioners gave consideration to the applicationof such a. principle in Western Australian wheatareas. Although this idea is an attractive one, andmay at some time in the future be possible of appli­cation, informal discussions with the Soil Conserva­tion Commlssiouer indicated that sufficient basicinformation concerning the nature, extent and causesof soil depletion in the wheatgrowing areas and therelative effects of different rotations and farm man­agemcnt systems was not at present in existence.Until such time as a considerable accumulation ofinformation on this subject is available, which isnot likely to be for some years, no action along theseJines can be suggested.

Methods of Acreage Regulation.

4'7. Your Commissioners gave considerable thoughtto methods by which regulation of acreage might beeffected, should action along these lines again becomenecessary. Broadly speaking, there are two alterna­tive bases for production control, namely, accordingto area sown and harvested, or to quantity of wheatfor which a market is sought, i.e., acreage of bushel­age.

. The former method was the one adopted duringthe war period when it was necessary to restrict thequantity of wheat produced in Australia. Its obviousdisadvantages are the tight control which has to beexercised over a farmer's operations, and whichextends to wheat planted for both hay and for grainfor stock feed, and the difficulty of effectively polic­ing restrictions of this type. Both these difficultiescould be avoided if regulations were based on quan­tity marketed and the farmer left free to plant whatarea he wished in order to fill a pre-determined quota.However, a scheme on this latter basis would beattended by its own peculiar difficulties-, \\7Jlether it'would have a net advantage over an acreage restric­tion scheme can only be determined by careful inves-tigation.· .

Acreage regulation is not an immediate issue. Forthese reasons your Commissioners have not pursuedtheir investigations far enough to be able to expressan opinion as to the desirability of one or other ofthe above methods. However, they feel that in anynegotiations with the Commonwealth Government theneed for such an investigation should be urged. Inany case, they arc of the opinion that even if theacreage basis is retained, it should be thoroughlyrevised and brought up to date as regards the indi­vidual licensee.

Although methods of acreage control on a commonbasis for all States might conceivably inflict hard­ships on growers in some of them, it would hardly bepracticable for each to evolve its own scheme. How­ever, if action along these Jines becomes necessary,representatives of this State should press for ascheme which preserves the economic efficiency ofthe relatively large-scale wheat farms which arecharacteristic of the main Western Australian wheatbelt.

Recommendations.

That the State Government urge the Common­wealth .Government to reapproaeh the subject ofstabilisation of wheat prices on the following lines i-c-

(1) That an equalisation trust fund be createdembodying the moneys derived from theoperations of the Wheat Export ChargeAct of 1946 and which have been appro­priated to a trust fund by section 31 ofthe Wheat Industries Stabilisation Act,No. 24 of 1946, and that similar taxa­tion measures be continued with a viewto the establishment of a- permanent fundto be used to equalise export prices.

(2) Tbat after the season 1947-48 the amonntof the tax per bushel be such an amountas will bring in a total sum equivalent tothat arising from a levy of 2s. per bushelon wheat exported, or such lower amountpel' bushel as may be prescribed by theMinister, but in no case to be more than2s.

(3) 'I'hat the Equalisation Trust Fund be usedsolely for the purpose of augmentingrealisations when export prices are low.

(4) That the Equalisation Trust Fund shall beadministered as a revolving fund as out­lined previously in paragraph 41 of thisreport.

Your Commissioners desire to place on record theirappreciation and thanks for the valuable assistancerendered to them by the officers of the Trustees ofthe Wheat Pool of W.A., Co-operative Bulk Hand­ling Ltd., and the Westralian Farmers Ltd., in mak­ing available data from their records and for theexcellent graphs relating to price movements.

JOHN S. TEASDALE,Chairman.

S. ,8. DONOVAN,}J. SADLER,R. P. ROBER.TS,

Members.14th May, 1947.

SCHEDULE A.

~~,."5'~

~

I,

I(A) (B) (e) (D) (E) (P) (a) (H) (T) (,J) (K) (LI

IMarketed Marketed Percentage Internal Internal Average i Average Hate of Total Value Proportion Value of Net

Pool No. Australian W,A. \V.A. Consumption Consumption Price Realization Concession of of Draw back LossCrop Crop Crop Australia \V.A. Evporte Price pee Concession Concession Ooncesslonal to

Bushels Bushels of Bushels Bushels during Internal Bushel. to Supplied Wheut State000 000 Australian 000 000 aame Consumpt.ion Consumers by used

Iomitted. omitted.

ICrop. omitted. omitted. pe-riod. including

iIn \V.A. in W.A.

Subsidies. Auatrn.liu.

i

Ix H I x C ExfI .J-KD£ £ £ £

[; 153.974 :14,07i :W-7% 66,726 3.335 4/4~ 4 N .:t IJ,J. 480,S33 101.174 24,328 7t1.S·Hii ~4

G 141,990 17,982 12·6% 72,926 6.134 [,j:n 4/9t tld. 1.823.WO 229.71.') li'):~.;~50 7G.:~Gf)

7 and S 133,472 26,935 20·2% 127.971 8,0:l3 8/S& :;/G~· :~/2 20.21)2.07,) 4.0!):~.9:~9 1.271.891 2,822.0489 123. 72:~ 17,711 14·:31% GO,S:~2 4,[,00 10/:;~ 4/7~ Ij/lO 17,742.6GG 2,ij3S.97D 1.312,UOO J.2:W,47;j

10' 9S,000 20.500 20·92% 60.000 4.500 Hi/- 4/'1 lOll ;~0,2W,OOO G.:3:~8.:::00 2,268.750 4,0;"jfJ.J50

£70,564,72·1 £l3,292,10:~ I £5,030.. 819 £S,261,2S'~·

I

,I I ! I

I(A) (B) (e) (D) (E) (F) (G) (HI (I) (,J) (K) (Ll

Marketed Marketed Percentage Internal Internal Estimated Average Rate of Total Value Proportion Value of NetAustralian \V,A. W.A. Consumption Consumption Average Price Concession of of Draw back Annual

Crop Crop Crop to Australia \V.A. Price Internal pO' Concession Concession Representing: L08:>Bushels Bushels Australian Bushels Bushels Exports Consumption. Bushel. supplied Oonceesione.l to

000 000 000 000 during by \V.A. Wbeaf used State.omitted omitted omitted omitted the Estimated. in \V.A.

iPeriod,

II I

F·-GI

DxHi r s: C ExH .J-K

I£ £ £ f

Estimated AV'Icnt\!;(\ of 1111

l-1;j,OOO I gO,OOO IrOf;!." to 1f);}0 ~9,OOO ~W':, 4.:")00 Hl/- 4/ll :")/J 1;;,2;;0.000 :3.lj50,OOO 1.14:t/;;o 1.~llj{;.:l·,o

Net benefit to Wheatgrowers arising from distribution ofFlour Tax in period when internal prices were higher than export.

Acreage shown for grain, 1943-44Acreage shown for grain, 1944-4,')Acreage shown for grain, 194J3-46Acreage shown for grain, 1946-47

Australia.7,875,1208,463,150

11,425.40012,727,784

~

~

182,777

£8,078.507

76,277

Net Benefit to W.A.106,500

27·6% of \276.364

are linked together in this statement,

£1,126~444

+£900,080+276.364

\V.A.1,567,0001,516,0001,835,8002.553,080

+1·3d.*4/:l-l

SCHEDULE B.

51,02127'6%Details not available

63,659 I 17,57524

:'!8~

~<"-

"~~.,,.~

"~".

:'!

"~

"

.",:. ,.-.'"